Dubai developers offer heavy incentives to attract property buyers
Filed on May 8, 2019 | Last updated on May 8, 2019 at 07.53 am
Developers in Dubai are going the extra mile to dispose of unsold stock.
Lucrative incentives, innovative payment plans and freebies are tempting investors and tenants to own a home in Dubai as developers are going the extra mile to dispose of unsold stock ahead of the potential upcoming supply of over 50,000 homes this year.
Developers in Dubai are pulling out all the stops to win over buyers for newly launched and existing projects by extending post-handover payment plans on off-plan properties to ready homes as well as arranging bank financing for an initial down payment of the property.
Extended post-handover payment plans from three years to anything up to 15 to 20 years, rent-to-own schemes and guaranteed rental returns are now the industry norm as the developers get creative to compete with other investment markets.
Experts? and analysts said it is a win-win situation for both developers and buyers as Dubai real estate market enters into a maturity phase and shows stability despite more than 27 per cent decline in prices since the peak of mid-2014.
Lynnette Abad, director of Research and Data at Property Finder, said developers have become quite creative over the last few years to sell their properties, both under construction and ready stock. The most popular have been the post-handover payment plans, rent-to-own and new schemes such as the one offered by Emaar and DMCC, she said.
“Developers are very aware that they need to be creative with new offerings to attract more foreign direct investment and be competitive with other popular investment markets,” she said.
Market insiders said developers have been playing the role of banks to stimulate demand for both off-plan and ready properties with ingenious payment plans. This is because, under the current loan-to-value requirements in the UAE, the majority of buyers find it difficult to raise bank finance, and establish a foot on the ladder, due to hefty deposits and fees required.?
“As the real estate sector matures, developers need to come up with innovative schemes to attract buyers. Rent-to-own and extended payment plans are crucial in attracting home buyers,” said Rizwan Sajan, founder chairman of Danube Group.
He said more than 80 per cent of the UAE expatriates still live in rented homes and most of them have a wish to own their home in Dubai and these payment plans will surely help them.
“In the coming years, we expect more innovation to drive the growth of the real estate sector in Dubai,” he said.
“In 2014-15, we launched trend-setting one per cent monthly payment plan that helped us to attract thousands of end-users who had earlier been priced out of the market. Since then, we sold more than 5,000 units in the last 5 years.
“We have successfully converted thousands of tenants to home-owners. Going forward, these innovative schemes will help attract more end-users and home buyers to Dubai’s real estate,” he said.
Public, private developers?
While government-affiliated developers are the ones offering flexible payment plans and rent-to-own schemes for ready homes, private players are jumping on to the bandwagon as well. Nakheel is offering a payment plan for the Al Furjan villas and townhouses where buyers can move in now and pay across seven years. Customers only need to put down a five per cent deposit. Other perks include no Dubai Land Department fees, two years free service charges and two years of free club membership.?
The latest incentive deployed by Azizi Developments for a newly launched scheme in Al Furjan is to partner with one bank for down payment loans while another financial institution will service the remaining portion of the mortgage. This has been conceptualised to bring in people who cannot afford the initial down payment.
Shaher Mousli, the chairman, Arthur Mackenzy Properties Group, said extended multi-year payment plans and rent-to-own schemes are a norm in many parts of the Western world, however, it is the developer-financed projects that are able to offer the level of flexibility that the buyers in today’s market expect.
“With offers like 10-year and 15-year rent-to-own schemes direct from the developer in the market, we foresee a sizeable part of UAE residents becoming homeowners,” he said.
“International investors have traditionally been unable to benefit from local banks with little or no offerings to suit them. Such payment plans directly from developers will surely add to the surge of international investors ahead of Expo 2020,” he added.
Rent-to-own schemes could see a good take-up since tenants only need to produce a small down payment unlike the 25 per cent sought by banks for mortgages. Even industry giant Emaar Properties is offering back-loaded payment plans for a slew of its off-plan projects across Dubai. The developer offered post-handover payments for buyers of ready villas in Arabian Ranches 2, where the average price is D1,160 per sqft.
Emaar is also providing a scheme at a Dubai Hills Estate project where buyers of an apartment get a three-year renewable business licence, three-year renewable family residence visa and 100 per cent business ownership in DMCC.?
Similarly, Sobha Realty is offering a discount on school fees for those buying an apartment in its project – Hartland Greens, where the average price for off-plan projects is Dh1,870 per sqft, according to DLD data.?
Haider Tuaima, head of Real Estate Research at ValuStrat, said any payment plan that minimises down payments with monthly payments not exceeding 30 per cent of an income is welcomed news by expats working in the country seeking to become owner-occupiers.
“As the market matures, master developers and sub-developers alike, become further aligned with market demand, and since current demand is biased towards affordable housing, we can expect more innovative payment plans for the medium term,” he said.
“It would be prudent that such plans are designed around a buyers’ ability to repay in the long term and that appropriate credit checks are taken by the seller at the outset of the agreement,” Tuaima said.
In a bid to offload unsold stock from their inventory, developers are also offering a guaranteed rental return for several years on their serviced apartments to bring in investors. Damac Properties, in particular, has been piloting such schemes. However, longer payment plans can also result in higher property prices for buyers. Such properties are always traded at a significant premium to the general market price.?
Even in the rental market, big developers like Dubai Properties are offering up to 12 cheques and adding in sweeteners like a month’s free of rent to fill up unoccupied units in communities like Remraam and Ghoroob Mirdif.
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